A man who cannot make mistakes cannot do anything.

(Bernard's Bingo Magazine)

ACCOUNTING MECHANICS
By- Dr Amit Kumar Sinha
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ACCOUNTING EQUIVALENCE Assets = Owners Equity + Outside Liabilities

A = OE + OL
2

DOUBLE ENTRY SYSTEM

A = OE + OL
Debit = Credit
In the double-entry accounting system, every transaction is recorded by equal amounts of debits and credits.
3

ACCOUNTANTS LIFE

A = OE + OL
ASSETS Debit Credit for for Increase Decrease ASSETS LIABILITIES Debit Credit for for Decrease Increase LIABILITIES EQUITIES Debit Credit for for Decrease Increase EQUITIES

Debit

Credit

Debit

Credit

Debit

Credit

ACCOUNTING CYCLE
1. Business Transaction 2. Transaction is recorded in document 3. 4. 5. 6. 7.

(Voucher / Receipt) Analyze the transaction location ? Journal Entry Ledger Accounts (or T account) Trial Balance Balance Sheet, P&L A/c, Cash Flow Statement

ACCOUNTANTS ROUTINE

Transaction

Source documents

Analyze

Balance Sheet P & L A/c Cash Flow Prepare a trial balance

Post to the ledger

Journal Entry
6

ACCOUNTANTS ROUTINE

Transaction

Source documents

Analyze

Balance Sheet P & L A/c Cash Flow Prepare a trial balance

Post to the ledger

Journal Entry
7

TRANSACTION-1
Chirag started business with cash $ 30,000.
The accounts involved are: (1) Cash (asset) (asset) (2) Owners Equity (equity) (equity)
Assets Cash Supplies Equipment 30000 = OE Accounts Notes Payable Payabl + (1) OL Owners' Capital 30000

30000

0 30000

0 =

0 30000

30000

TRANSACTION-1
EQUITIES ASSETS Chirag started business with cash Rs. 30,000.

The accounts involved are: Debit Debit (asset) Credit (1) Cash (asset) (2) Owners Equity (equity) (equity)

Credit

+
Page 1

JOURNAL ENTRY
Date 2001 Dec. 1 Cash Particulars LF Debit 30,000

Credit

To Capital Investment by owner Dec. 2 Supplies 2,500

30,000
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TRANSACTION-1 - LEDGER
J
ate 2001 ec. 1 as T a ital In e tment b o ner Dec. 2 S lies as Purcha ed tore upplie Cash for ca 30,000 h 2,500 2,500

E T
Partic lars e it 30,000

Pa e 1
re it

30,000

a i al
(1)

(1)

30,000

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Thank You

Now, was that debits to the left or credits to the left? I sure wish I had paid more attention in class!

Email: dramitksinha@gmail.com

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